The Swiss National Bank: 1907-2007.

• Author: Schuler, Kurt
• Position: Book review

The Swiss National Bank: 1907-2007

Werner Abegg, Ernst Baltensperger, et al., contributors

Zurich: Neue Zurcher Zeitung Publishing, 2007, 823 pp. (Also in shorter French, German, and Italian editions.)

The Swiss franc is the world's best-performing currency over the last century: it has lost only about 87 percent of its value in terms of gold, compared to 97 percent for the U.S. dollar and more than 99 percent for almost all other currencies. Switzerland's avoidance of wars, which is part policy and part lucky geography, has contributed to the relative stability of the franc. So have the conservative financial habits of its citizens, which have been reflected in the country's generally prudent government finances. But some credit undoubtedly belongs to the central bank, the Swiss National Bank. It has consistently pursued monetary policies that have produced low inflation, and has made few consequential errors since it was established in 1907. Its experience therefore should be of interest far beyond the borders of Switzerland. This centennial volume, by a constellation of 40 Swiss and foreign authors, is a history and an examination of issues in monetary policy the central bank has faced. It is typically Swiss in its occasionally ponderous thoroughness, pleasing design, and high quality.

The book is divided into three parts: a history of the central bank's first 75 years, a more detailed analysis of the last 25 years, and assessments of policy issues from the recent past into the near future. Michael Bordo and Harold James summarize the central bank's history from 1907 to 1946 in a deft analytical account that focuses on the problems the central bank faced and how its responses fit into the politics, economics, and economic theory of the time. Intriguingly, their brief discussion of the central bank's origins implies that there was no real economic necessity for the institution. Before central banking, Switzerland had a system of decentralized, competitive note issue that on the whole worked well. Its main flaws--certain problems with notes, coins, and foreign exchange--resulted from government regulations that impeded banks from devising solutions.

Peter Bernholz follows with a chapter on the remaining years until the bank's 75th anniversary in 1982. The goals of maintaining a pegged exchange rate and keeping inflation very low sometimes conflicted, because Switzerland at times received large inflows of speculative capital. Exchange...